Economic Development Toolbox: Shared Public Services as a Method for Reducing Local Municipal Costs

Part of this historically higher rate of taxation is due to the fact that New York has many more local governments and agencies than most states. In fact, New York has over 10 percent of its working population occupying local government positions, compared to the national average of 7 percent. Employment-wise, local governments across the country utilize 30 percent less people to run them than in New York. The cause is fairly clear- there are too many governmental and taxing entities. While placing governance at the local level is good for many reasons- it allows more direct control by denizens, creates a stronger sense of community, and creates a government more quickly responsive to public needs, to name a few- it weakens governments’ ability to reach economies of scale necessary to achieve cost savings on services. This means higher taxes to cover those higher costs. Since most individual municipalities in New York are too small to support large-scale service systems, savings enjoyed by larger governments are not available to them.

The high taxes necessary to sustain this form of government creates a very real disincentive to businesses. A company can pay employees less in Pennsylvania than in New York, and yet still provide the same amount of take-home pay. Companies can relocate across the border and use this competitive edge to increase profits, attract high-quality talent at a lower cost, or decrease production costs.